Irda proposes broader micro insurance product

To boost the micro insurance sector, the Insurance Regulatory and Development Authority (Irda) has proposed to allow broadening of the product portfolio and distribution network, by allowing more entities to sell the products.

It has proposed to allow cooperative banks, regional rural banks, primary agricultural co-operative societies and individuals (shopkeepers, medical store owners, petrol pump owners, public telephone operators) to act as micro insurance agents. Noting the sector’s business performance was far below the potential, the regulator has decided to revisit the regulations. The Micro Insurance Regulations prescribe a framework within which insurers can offer affordable products in this regard.

Irda notes a majority of the products offered are basic ones, and mostly term assurance. It has asked insurers to consider diversifying the portfolio of micro insurance products by including savings-linked and health cover features.

It has said the non-life retail segment of the micro insurance business might not be an attractive line of business at present, since it mainly covers individual risks (dwelling, livestock, tools) which are yet to be considered insurable by these segments. To cater to this category, Irda has proposed an option of appointing micro insurance agents either to any one sector of micro enterprises, small enterprises and medium enterprises, or to all three or any combination of two. Similarly, a non-life insurance company has the prerogative of appointing micro insurance agents in these combinations either in the manufacturing sector or the service sector or in both. The maximum premium allowed under this segment of non-life micro insurance policy is proposed to be pegged at Rs 25,000.

To encourage micro insurance agents to maintain a reasonable persistency, Irda has proposed to link the latter rate to the remuneration allowed. It has proposed a renewal commission of 20 per cent for those agents maintaining a persistency rate of 50 per cent at the end of the preceding two financial years. The others would get only 10 per cent.